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Cross Elasticity Of Demand Of Samsung

745 Words3 Pages

Samsung is a big company that produces phone, television, and many other electric goods. Samsung is well known as galaxy series of phones and one of the series, which were some galaxy note 7 devices had caught fire while it was charging. This situation had made costumers to find substitute, which were the Apple products (cross elasticity of demand). This caused Samsung product to be inelastic to elastic product. South Korean government will try providing subsidy to Samsung product to keep GDP.
Apple and Samsung companies they are very competitive to each other, if one of the companies is in hard situation, it makes benefit to the anther company. This concept is called cross elasticity of demand. This term can be defined as “a calculation of the amount of demand for a product changes when there is change in price of another product”. . This is calculated following the equation: percentage change in quantity demanded of product X by percentage change in price of product Y. The graph below shows the graph of cross elasticity of demand substitutes: Figure 1: Samsung (X) and Apple (Y) relationship – substitutes
In this graph, price of X represent the Samsung galaxy 7 note and demand for Y represent the iPhone 6 series. As Samsung increase the price of the product to P1 to P2 since Samsung needs income to maintain the system, the demand for apple product will increase Q1 to Q2 since consumers feel burden to buy the Samsung product. Samsung will lose their brand loyalty

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